Phenomenal World

Phenomenal World

September 3rd, 2019

Eye Machine

Eye Machine

IMPLICIT FAVOR

The failures of research on fin-tech and poverty alleviation

Last week, we considered how social and political standards can pressure climate scientists to under-report their findings, introducing an underestimation bias into published climate research. In a recent thread, Nicholas Loubere examines the development buzz around mobile money, showing how similar factors can serve to exaggerate the findings of academic studies.

In a new article quoted in the thread, MILFORD BATEMAN, MAREN DUVENDACK, and NICHOLAS LOUBERE contest a muchcitedstudy on the poverty alleviating effects of mobile money platforms like M-Pesa. The criticism rests largely on grounds of omission: the study, they argue, ignores the closure of nearly half of microenterprises opened with M-Pesa, the jobs and incomes lost with the introduction of new businesses into fragile markets, the burgeoning debt accrued through digital loans, the overwhelmingly foreign ownership of M-Pesa and its profits, and the wealthy networks composing its primary users. Methodologically, it had no control group, used a small sample size, and overlooked the potential for reverse causality.

Why was a potentially flawed study so well regarded? According to Bateman, Duvendack, and Loubre, it's in part because its results told researchers and policymakers what they wanted to hear. From the article:

"The rapid popularization of fin-tech as a developmental solution is premised on the continued prominence of microcredit and the broader concept of financial inclusion. The microcredit movement was established and validated in the 1980s on overblown and ultimately false claims that providing small loans to groups of poor women was a panacea for global poverty reduction—claims that were especially associated with Dr Muhammad Yunus. Empirical justification came from an impact evaluation undertaken in Bangladesh by then World Bank economists Mark Pitt and Shahidur Khandker, which claimed that microcredit programs had significant beneficial results for impoverished female clients. For many years, Muhammad Yunus used Pitt and Khandker’s findings to successfully ‘sell’ the microcredit model to the international development community, generating a consensus that the microcredit model was the most effective way to efficiently provide enormous benefits to the global poor."

Link to the article, and link to a blogpost in which the authors outline their key findings.

"Kenya’s new experience of debt reveals a novel, digitized form of slow violence that operates not so much through negotiated social relations, nor the threat of state enforcement, as through the accumulation of data, the commodification of reputation, and the instrumentalization of social ties." Kevin P. Donovan and Emma Park report on the consequences of mobile debt for poor borrowers. Link.

In an article from 2017, Loubere "examines examples of exploitation, fraud, instability, and extraction related to expanded digital financial coverage in contemporary China." Link. At Bloomberg, David Malingha compares credit markets in Asia with those of sub-Saharan Africa. Link.

"This article claims that to bring finance back to serve the real economy, it is fundamental to (a) de-financialize companies in the real economy, and (b) think clearly about how to structure finance so that it can provide the long-term committed patient capital required by innovation." Mariana Mazzucato on governments' role in ensuring that finance serves public ends. Link.

New Researchers: INVERSE VOYAGE

The upward mobility gap and the Great Migration

Assistant Professor of Economics at UC Berkeley ELLORA DERENONCOURT's paper, "Can You Move to Opportunity?," considers the effect of the Great Migration on upward mobility for African Americans, finding that it "reduced upward mobility in northern cities in the long run, with the largest effects on black men."

From the introduction:

"Between 1940 and 1970, four million African Americans left the South and settled in urban areas in the north and west of the country. The Great Migration, as it is known today, radically transformed the racial demographics of destination cities, prompting white flight from urban neighborhoods and altering the policies of local governments.

I show that the Great Migration led to a reduction in upward mobility in destination commuting zones in the North today. A 30-percentile greater increase in the black population lowered adult income rank of children from low income families by 3 percentiles, approximately a 9% drop in adult income. My analysis reveals significant and persistent responses starting in the 1960s in the following areas: decreases in white public school enrollment and urban residence within the commuting zone; higher local government expenditures on police and higher murder rates; and increased rates of incarceration."

Each week we highlight great work from a graduate student, postdoc, or early-career professor. Have you read any excellent research recently that you'd like to see shared here? Send it our way: editorial@jainfamilyinstitute.org.

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A remarkable thread from Albert Pinto on the global political economy of land ownership and food production. Highlights within: an Adam Tooze post in 2018 on "feed and oceanic deadzones"; a recent list of companies benefiting from Amazon's fires; a CFR interactive on Amazon's deforestation.

Via James Murphy, three recent papers that call into quesiton the efficacy of nudge campaigns in higher ed: one, on FAFSA nudges (no impacts on FAFSA receipt or enrollement); two, on College Board attempts to increase broad and ambitious applications (little impact); and three, nudges to encourage studying and coaching (little impact, possible adverse impact).

"In Tianjin's auto industry, spontaneous multi-employer wage coordination occurs through informal arrangements that leverage a lead firm's control over its suppliers and various social networks that connect employers, labor unions, and workers in the locality. As a result, wages across the local auto industry are greatly compressed." Hao Zhang on regional value chains and wage coordination in China. Link.

Kevin McClure et al look at public-private partnerships and college student housing. Link. (Via a thread by McClure discussing the impact of P3 arrangements for student housing, spurred by a Bloomberg article on the same.)

Gibrán Cruz-Martínez examines assumptions on targeting and universalism for social protection programs for the elderly: "The study finds that (i) 79 countries would be economically able to shift from targeted noncontributory pensions to basic universal noncontributory pensions with less than 1.2 percent of the respective national gross domestic products; (ii) 16 countries have means‐tested/region‐tested noncontributory pensions more expensive than a hypothetical basic universal social pension; (iii) an arbitrary threshold of 'economic development' is not a limitation for implementing social pensions; and (iv) at least 17 countries with relatively low economic development have successfully implemented social pensions without means targeting." Link. ht Sidhya

By Heldring, Robinson, and Vollmer: Monks, Gents and Industrialists. "We examine the long-run economic impact of the Dissolution of the English monasteries in 1535, which is plausibly linked to the commercialization of agriculture and the location of the Industrial Revolution. Using monastic income at the parish level as our explanatory variable, we show that parishes which the Dissolution impacted more had more textile mills and employed a greater share of population outside agriculture, had more gentry and agricultural patent holders, and were more likely to be enclosed. Our results extend Tawney’s famous ‘rise of the gentry’ thesis by linking social change to the Industrial Revolution. We provide to our knowledge the first systematic investigation of the link between the Dissolution and long-run English economic growth, in particular changes in social structure and the Industrial Revolution." Link.